Satisfying the Credit Counseling Requirement

Posted by Andy Toth-Fejel on November 20, 2017 under Bankruptcy Blog | Comments are off for this article

Since the 2005 amendments to the Bankruptcy Code, you can’t file an individual bankruptcy case  (Chapter 7, 13 or individual Chapter 11) without first taking the so-called “credit counseling.” course from an approved nonprofit budget and credit counseling agency.

What’s Actually Required?

Not much.  It’s actually a simple procedure you do on the internet, or by phone if you prefer. You simply provide some information about your debts, income, and expenses. Then are almost always told that your income is not sufficient to pay for your expenses.

180 Days before Filing

The “counseling” session must take place “during the 180-day period” before filing bankruptcy. So be sure that you’re going to be filing bankruptcy within that length of time after you do it. Otherwise, if your bankruptcy filing is delayed beyond the 180 days, you will  have to take the course again.

Usually people run into the opposite problem, putting it off too long.  Even though you can usually get the requirement out of the way within 24-48 hours, there are situations where debtors come to an attorney to file on the day of a foreclosure sale.  In that case, the debtor can be  SOL.

Reason for this Requirement

The supposed reason for this requirement was to encourage people to consider options other than bankruptcy.

The United States Government Accountability Office has issued a report which questions that viability of that rationale:

“The counseling was intended to help consumers make informed choices about bankruptcy and its alternatives. Yet… by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. As a result, the requirement may often serve more as an administrative obstacle than as a timely presentation of meaningful options.”

My opinion is that one of unspoken policies for the 2005 amendments was to discourage bankruptcy filings by making them more time consuming and expensive.   The credit counseling requirement (and the financial management course requirements, see below) are just additional hoops through which a debtor is forced to jump.

Costs/Where to Go ?

When the requirement first came out, it cost about $75-100 for the credit counseling course.  Now, the cost is down to $20-35 on the average.  You can find a list of approved providers on the US Trustee’s website, but it is easier to get a recommendation from your lawyer.

You also have to take a financial management course after the filing.  Same cost.  No course, no discharge.